Stocks With Dividends Rated Very Safe By Simply Safe Dividends And Yields Above Their 5 Year Average

Summary

• I wanted to find stocks with dividends rated VERY SAFE by Simply Safe Dividends (81 points or higher) and dividend yields above their five year average.
• A dividend yield above the five year average yield is one indication that a stock may be undervalued.
• I also checked Morningstar, Value Line and Dividend Radar for their fair value estimates looking for confirmation that the stocks were undervalued.

I ran a screen on Simply Safe Dividends looking for stocks that had dividends that were rated VERY SAFE (81+ points) and dividend yields at or above their 5 year average. A total of 15 stocks passed the initial screen. (see below)

Stock	Ticker Symbol	SSD	Yield	5 Yr Ave Yield	M* Rating
1st Source Corp.	SRCE	96	2.62%	13% above	3 star
Atmos Energy	ATO	97	2.84%	28% above	3 star
Cass Info. Systems	CASS	99	2.66%	35% above	3 star
EOG Resources	EOG	82	3.35%	158% above	3 star
Lockheed Martin	LMT	84	3.25%	24% above	4 star
M&T Bank	MTB	99	3.15%	27% above	3 star
MSC Industrial	MSM	84	3.54%	8% above	3 star
Prosperity Bancshares	PB	92	2.82%	16% above	3 star
Reinsurance Group Am.	RGA	99	2.83%	67% above	4 star
UGI Corp.	UGI	99	3.02%	31% above	3 star
WEC Energy	WEC	87	3.11%	2% above	3 star
Ingredion	INGR	99	2.70%	in line (0% off)	4 star
Eastman Chemical	EMN	85	2.59%	in line (1% off)	3 star
Cummins	CMI	98	2.66%	in line (3% off)	3 star
DTE Energy	DTE	90	3.05%	in line (4% off)	3 star

A current dividend yield that is higher than the 5 year average yield is one indication that a stock may be undervalued. However, by itself, it is not sufficient to conclude a stock is undervalued. I wanted confirmation, so I consulted my usual three sources. First I checked Morningstar for their star ratings and fair value estimates. Next I looked at Value Line for their 18 Month Target Price Midpoint. Then I checked Dividend Radar for their fair value estimates. The final step in the process was to calculate a Price to Fair Value Ratio for all three sources. (see table below)

Stock	Stock	Fair Value	Midpoint	Price to FV	Price to FV	Price to FV
	Price	Morningstar	Value Line	Morningstar	Value Line	Div Radar
ATO	95.74	99.00	108.00	0.97	0.89	1.00
CASS	42.09	45.68	n/r	0.92	n/r	1.00
CMI	218.10	231.00	272.00	0.94	0.80	1.00
DTE	116.22	112.00	126.00	1.04	0.92	n/r
EMN	117.30	125.00	123.00	0.94	0.95	1.00
EOG	89.68	93.00	61.00	0.96	1.47	1.00
INGR	96.35	120.00	88.00	0.80	1.09	1.00
LMT	344.88	402.00	420.00	0.86	0.82	0.91
MSM	84.67	85.00	74.00	1.00	1.14	0.97
MTB	152.21	162.00	138.00	0.94	1.10	n/r
PB	73.66	78.08	n/r	0.94	n/r	1.00
RGA	103.30	131.38	131.00	0.79	0.79	2.09
SRCE	47.40	51.12	n/r	0.93	n/r	0.75
UGI	45.73	44.87	40.00	1.02	1.14	0.93
WEC	93.48	94.00	102.00	0.99	0.92	1.01

Atmos Energy (ATO) Cummins (CMI) Eastman Chemical (EMN) Lockheed Martin (LMT) and WEC Energy (WEC) are considered under/fairly valued by all of the metrics examined. (Note: ATO & LMT also showed up in the screens I ran for my previous article.) Cass Information Systems (CASS) Prosperity Bancshares (PB) and 1st Source Corp. (SRCE) are also considered undervalued by the metrics examined, but Value Line does not provide an 18 Month Target Price Midpoint estimate.

There is a significant difference of opinion on some of the other stocks. Since they are all rated 3 or 4 star, Morningstar considers nearly all of these stocks under/fairly valued. With one notable exception, Dividend Radar seems to agree. However, Value Line believes EOG Resources (EOG) MSC Industrial (MSM) M&T Bank (MTB) and UGI Corp. (UGI) are at least 10% above fair value. Reinsurance Group of America (RGA) appears undervalued by most metrics, but Dividend Radar strongly disagrees. Dividend Radar believes the shares are extremely overvalued.

Even though there is disagreement regarding valuation on about half the names that turned up in this screen, I believe the exercise was worthwhile. It did uncover a few names worthy of additional due diligence and RGA has really piqued my interest. I want to do more research to try to determine why there is such a wide discrepancy in the valuation estimates.